Our OpComms products address the following markets: Telecom, Datacom and Consumer and Industrial.

Our Lasers products serve our customers in markets and applications such as sheet metal processing, general manufacturing, biotechnology, graphics and imaging, remote sensing, and precision machining such as drilling in printed circuit boards, wafer singulation, glass cutting and solar cell scribing.

Under the terms of the merger agreement, on Closing Date, NeoPhotonics stockholders received $16.00 per share in cash for each of their NeoPhotonics shares for a total cash consideration of $867.3 million.

Please refer to "Note 4. Business Combination" to the consolidated financial statements.

On August 15, 2022, we completed a transaction to acquire a business that develops and markets products for use in telecommunications and datacenter infrastructure, including Digital Signal Processors (DSP's), ASICs and optical transceivers. This acquisition will help us to expand our business in our OpComms segment. Please refer to "Note 21. Subsequent Events" to the consolidated financial statements.

Impact of COVID-19 to Our Business

For more information on risks associated with the COVID-19 outbreak and regulatory actions, please refer to the section titled "Risk Factors" in Item 1A of Part I of this report.

Critical Accounting Policies and Estimates

Pursuant to Topic 606, our revenues are recognized upon the application of the following steps:

Transaction Price Allocated to the Remaining Performance Obligations

We record shipping and handling costs related to revenue transactions within cost of sales as a period cost.

The following table reflects the changes in contract balances as of July 2, 2022 (in millions, except percentages):

The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments. Changes to these estimates or a change in judgment may have a material impact on our tax provision in a future period.

Please refer to "Note 2. Recently Issued Accounting Pronouncements" to the consolidated financial statements.

Financial Data for Fiscal 2022, 2021, and 2020

The following table summarizes selected consolidated statements of operations items (in millions, except for percentages):

Merger termination fee and related costs, net $ - $ (207.5) $ 207.5

Lasers net revenue decreased by $41.4 million, or 25.3%, during fiscal 2021 as compared to fiscal 2020, primarily due to reduced customer demand for our kilowatt class fiber lasers as a result of COVID-19.

*Represents less than 10% of total net revenue.

Gross Margin and Segment Gross Margin

The following table summarizes segment gross profit and gross margin for fiscal 2022, 2021 and 2020 (in millions, except for percentages):

OpComms gross margin in fiscal 2022 remained relatively flat at 51.4% as compared to 51.2% in fiscal 2021.

Research and Development ("R&D")

Selling, General and Administrative ("SG&A")

Please refer to "Note 13. Restructuring and Related Charges" to the consolidated financial statements.

Merger Termination Fee and Related Costs, Net

We had no impairments in fiscal 2022 or fiscal 2021.

Foreign exchange gains (losses), net $ 6.1 $ (4.4) $ (1.4)

We expect to contribute $1.4 million to our defined benefit pension plans in fiscal 2023.

Repurchase Made in Connection with Convertible Note Offering

(3) Purchase obligations represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Please refer to "Note 18. Commitments and Contingencies" to the consolidated financial statements.

As of July 2, 2022, our other non-current liabilities also include $30.5 million of unrecognized tax benefit for uncertain tax positions. We are unable to reliably estimate the timing of future payments related to uncertain tax positions.

Liquidity and Capital Resources Requirements

There are a number of factors that could positively or negatively impact our liquidity position, including:

•fluctuations in demand for our products as a result of changes in regulations, tariffs or other trade barriers, and trade relations in general;

•changes in accounts receivable, inventory or other operating assets and liabilities, which affect our working capital;

•increase in capital expenditures to support our business and growth, including increases in manufacturing capacity;

•the tendency of customers to delay payments or to negotiate favorable payment terms to manage their own liquidity positions;

•timing of payments to our suppliers;

•volatility in fixed income and credit, which impact the liquidity and valuation of our investment portfolios;

•volatility in foreign exchange markets, which impacts our financial results;

•possible investments or acquisitions of complementary businesses, products or technologies, or other strategic transactions or partnerships;

•issuance of debt or equity securities, or other financing transactions, including bank debt;

•potential funding of pension liabilities either voluntarily or as required by law or regulation;

•other acquisitions or strategic transactions;

•the settlement of any conversion or redemption of the 2024 Notes, the 2026 Notes, and the 2028 Notes in cash, and

•common stock repurchases under 2021 share buyback program

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